[0:00] Recording in progress. >> Welcome to the city council special

[0:05] meeting this Monday evening, February 23rd. City clerk, please call the role.

[0:10] » Certainly. Mayor Lorraine, council member Nome

[0:13] » here. >> Council member Sphere Gaditzki

[0:16] » here. >> Council member Nash

[0:18] » here. >> Deputy Mayor Fernandez

[0:20] » here. >> And Mayor Lorraine

[0:21] » here. Thank you and welcome. We're excited to

[0:26] be here in person with options for those who choose not to be in person to

[0:30] participate virtually. Thank you for your cooperation and for helping us

[0:34] maintain an efficient and accessible meeting environment. There are several

[0:38] ways to participate. For those attending in person, you may complete a yellow

[0:43] request to speak slip and hand it to the city clerk. If you are participating

[0:48] remotely, use the raise your hand feature in Zoom

[0:52] and you will be called on at the appropriate time.

[0:55] If you're calling in via phone, press star 9 to raise your hand and when

[1:00] called upon, press star six to unmute. These options for public comment will

[1:06] remain available until I close public comment period for each specific item.

[1:11] For members of the public who might be watching us on YouTube who wish to

[1:15] provide live public comment, please note that you must join the meeting through

[1:18] the Zoom webinar using the access information listed on the agenda as we

[1:23] don't currently have a public comment feature available in YouTube.

[1:28] And with that, we have one item in our special meeting, a study session, the

[1:33] fiscal year 202526 midyear budget update with a presentation from our finance

[1:39] director, Abby Viser. Good evening, Abby.

[1:43] » Good evening, honorable mayor and city council. As you mentioned, I'm Abby

[1:46] Viser, the finance director, and I'll be doing a brief overview of where we are

[1:51] with fiscal year 2526, uh, looking at our midyear. Um to give

[1:56] you a sense of what we're going to walk through today, um we will be talking

[1:59] mostly about our general fund, which is of course our main operating fund. Um

[2:03] we'll look real quickly at the 2425 actuals, how we ended that year. We'll

[2:09] look at how we're doing for fiscal year 2526, digging down more into revenues,

[2:14] um as well as expenditures, looking what our general fund balance is looking

[2:18] like. Um, we'll give an update on where we are with our financial sustainability

[2:22] plan and we'll also take a look at the sewer fund to see um, where that main

[2:26] enterprise fund how that's doing at this mid year.

[2:31] Um, to do kind of a refresher, this is the information that was presented in

[2:35] our annual comprehensive financial report. So, as of the end of the year of

[2:39] 2425, um, you can see we adopted a budget of

[2:43] with a deficit of about 10.6 6 million but by the end um at midy year we had

[2:48] projected 6.4 um as a deficit we ended with our

[2:53] auditing of 1.5 million in surplus and then when we look at our kind of

[2:58] budgetary um controls we ended up having a deficit of about 3 million 2.9

[3:03] million. So that's how we ended uh fiscal year 2425

[3:08] and then we'll go into what we're expecting for 2526.

[3:12] Uh back in June, the city council adopted our budget with a $12 million

[3:17] deficit. That was with the 175.8 in revenues and 187.8 in expenditures.

[3:23] At this point at about 20 for the 2526 midyear, we're expecting closer to 6.9

[3:30] as our deficit. Um again, that is kind of just looking at our spending um

[3:34] halfway into the year. And again, I'll kind of take a closer look at that. So,

[3:39] first let's look at our general fund revenues. uh for 25 26 um as you can see

[3:45] um we've had some um deductions. So in property tax we're seeing lower and this

[3:51] is because of the reduction in our VLF shortfall. We did receive that in August

[3:56] and because we only received 67% of our $6.6 million shortfall. We are showing a

[4:03] we we got 4.4 million and we're showing the $2.2 million deficit. So, I've

[4:08] revised the estimates in our property tax due to that VLF shortage. Um, we

[4:13] only got that 2.2 represents 33% of the shortfall. Uh, sales tax is looking a

[4:19] little lower. Um, real property transfer tax um is looking better and I'll kind

[4:23] of go into that. And then interest earnings are a little higher. And so,

[4:27] we're expecting at the end of the year about a million more in revenues. And

[4:30] again, this is a conservative estimate um kind of based on what we know at this

[4:34] time. Um, in terms of our revenue sources,

[4:38] property tax of course is our number one revenue source. It's very stable. Um,

[4:43] other than the portion of course that is VLF. So, you'll see here that it's been

[4:48] rising steadily over time. Um, but like I mentioned, we had anticipated 89.4

[4:53] million in property tax and only saw 87 million because of the VLF shortfall

[4:58] that was reduced this year. Um to talk a little bit more about

[5:03] property tax, I want to show um on this chart the blue bands kind of represent

[5:08] our secured based property tax. This is our really most consistent source. And

[5:13] although we've had higher levels of growth in the past, um this year we're

[5:17] seeing about 3.8%. Um which is is not bad. That's kind of what we budgeted. Um

[5:22] and it was it's showing consistent increases. In addition, in the red bar,

[5:27] we have our excess E-RF as well as other revenues that are property tax related.

[5:31] Those are also increasing steadily. And then you have VLF, um, which is kind of

[5:36] the green bar, which you can see it's kind of cyclical. It's going up and

[5:40] down. And again, that has to do with the shortfalls.

[5:44] So, [clears throat] I thought it'd be good just to take another moment to look

[5:47] at why property tax in lie, the vehicle license fee, um, is such an inconsistent

[5:53] source of funding. Um so you can see from here um that VLF is a major portion

[5:59] of our property tax. It's an important section um and it rises traditionally

[6:04] with the rest of property tax. But because VF is funded by excess ERF and

[6:09] property tax from our non-basic aid schools, we are not always getting that

[6:15] full allocation to the city of Sonteo as well as the other cities and the county.

[6:20] Um, right now of the 23 school districts that are within Sonteo County, five of

[6:26] them are non-basic aid. Um, and if that changes, our allocation goes down even

[6:30] more. But right now, this um, for this fiscal year, we're estimating 6.9 would

[6:35] be our total VLF entitlement. Um, with that only five school districts in the

[6:42] non-basic aid category, we would be getting 7 million less in that uh, VLF

[6:48] entitlement. And then we also usually get the shortfall from the previous two

[6:54] years because it takes two years to get that shortfall back. So this year we

[6:58] should have gotten the 6.6 million which was from 2324 and instead of course we

[7:03] got the 4.4 million which was 67% of that. So as you can see this year we're

[7:08] estimating about 14.2 in VLF. But there are some concerns

[7:15] because we don't know for sure if that 7.1 is actually going to be um the

[7:20] shortfall we're going to see and also of course whether we're going to get that

[7:24] funding from the state. So um I think you all are aware that the city is

[7:28] working with the county as well as all the other cities within Sonteo on

[7:31] several fronts to see how we can recover this shortfall both for this year and

[7:35] into future years because it is a significant portion of our funding.

[7:40] So, um, next I want to talk about our second largest, um, source of revenues,

[7:44] our sales tax. Um, this one I'm showing the trend line here because it has been,

[7:50] uh, fairly flat. Um, it's looking good, but it's also just not increasing at

[7:55] what we had expected it to increase. So, in yellow, you see the measure S sales

[7:59] tax. That's budgeted at about 6.8 million, and that's what we're expecting

[8:03] still for this year. Um, and then the remaining is the 1%. Um, and that's kind

[8:08] of sticking steadily with what we received last year. Um, but we did lower

[8:12] expectations just a little bit because we weren't yet seeing the growth we were

[8:16] hoping to see. Um, we'll wait another quarter to see if we get better data and

[8:19] we might be able to revise that up a bit. Um, but this is again our second

[8:25] largest source of funding and although measure [clears throat] S hasn't been

[8:28] increasing, it has been a stable at about $6.8 to 7 million.

[8:34] Uh the next source of funds I want to talk a little bit more about is our real

[8:38] property transfer tax. Um this is important because this is um definitely

[8:43] what helped us to not hit the deficit um last fiscal year and it is coming in

[8:48] pretty strong for this year as well. So if you can see the the red bar here is

[8:53] the portion of measure C uh portion of our real property transfer tax that

[8:58] comes from measure CC. So last year it was 6.2 million. This year we're

[9:03] expecting about 1.9 million. Um, and this again is the extra 1% on the

[9:08] regular property transfer tax which is in blue. This is voted in by Sonteo city

[9:14] voters. And again, it has provided an excellent one-time revenue source to

[9:19] help us especially when we're reaching those deficit years. But, um, we're very

[9:24] conservative in how we budget it because you can see that this, um, revenue

[9:27] source is quite volatile. it moves up with how the housing and commercial um

[9:33] real estate market moves and we can't count on it. Last year we had an a

[9:37] really nice chunk of measure CC, but I can't count that that will come in again

[9:41] this year. Um so I've moved that up to about 11 million in our budget. So

[9:46] that's up a bit and so is helping to offset our losses in property tax.

[9:52] Um now to move to general fund expenditures for fiscal year 2526.

[9:58] Um we are conservatively expecting that we will see some savings within our

[10:03] salaries and benefits. So I've adjusted that down about 2 million. Um and then

[10:08] also we're expecting some savings in our transfers out. So I've budgeted that at

[10:12] 2.1 million. Um the other major expenditure areas we're kind of keeping

[10:17] where they are because expendit expenses especially on the operating side are

[10:22] still fairly up given um the high cost of operating expenses.

[10:27] » What's transfers out? >> So transfers out Oh yeah. So transfers

[10:31] out are typically um items to our capital improvement projects. And so

[10:36] that it's budgeted items, but if they don't, so for measure S, example, we

[10:41] don't move it out until the projects are spent. So we don't some some funds we

[10:46] move right into our capital spending, but measure S we don't. So if we're if

[10:50] we still have measure S at the end of the year, then that's still in our

[10:53] general fund bank basically. So that's what that represents. Um, so this one,

[10:59] as you can see, I'm estimating a savings at the end of the year um to be

[11:04] expenditures closer to 183.7 million. And then again, just to refresh, that

[11:11] then leads us into expecting about a $6.9 million deficit as at the end of

[11:17] this year if we kind of realize the savings and that the revenue comes in as

[11:21] expected. Let's see. One thing I wanted to share

[11:25] kind of as we're looking at that is kind of our general fund trends. This is what

[11:30] it looks like with our operating expenses in green, our contributions to

[11:34] the CIP, those transfers out in purple, and then we have kind of this revenue

[11:38] line item that is fairly flat this year. Um, so that's where you can see the

[11:44] revenues are not rising with the expenses and that has kind of been

[11:48] unfortunately the story over time. So that's why we're always kind of trying

[11:51] to keep up um with where expenses are going.

[11:55] Um the other thing I want to talk to is the general fund balance. Um as you can

[12:00] see from this, we're expecting a slightly lower general fund balance. Um

[12:05] if that deficit of 6.9 million comes through. Um the good news is though at

[12:10] the end of 2425 we ended um that fiscal year with 119.5

[12:16] million in our our general fund reserve. Um thus showing you know how this

[12:22] council as well as councils before have been disciplined in their spending.

[12:25] We've really put away um that rainy day fund. So this careful spending from last

[12:30] fiscal year has really helped to keep the runway open as we work through our

[12:35] fiscal sustainability plan. So although we anticipate we could be down to 113

[12:40] million if this deficit comes to fruition, we still have that that's a

[12:45] pretty significant um reserve still. Um so talking through then what is going on

[12:50] with the fiscal sustainability plan because we are trying to make headway in

[12:55] that um given that we know this deficit spending is the deficits are still out

[13:00] in the next couple of fiscal years. Um I want to highlight kind of some of the

[13:05] levers that we're using around um the financial sustainability p plan. Uh the

[13:11] first one of course is expenditure control. That is an important one. The

[13:14] city um all the different departments are kind of looking at belt tightening

[13:17] and where we can be efficient in our spending and save money. Um so within

[13:22] that category um we have um about eight frozen positions within the city right

[13:27] now that we're holding um from recruitments and that's saving us

[13:31] funding. We also are trying our best to um charge to capital projects where it

[13:36] makes sense as well as move funding out of the general fund where it makes

[13:40] sense. We've been looking at benefit savings. So, we've moved some of the

[13:44] charges from the workers comp out of the general fund because that that fund has

[13:47] a healthy balance right now. So, we think we can go a year or two or or

[13:51] maybe even three without charging quite as much as we've been charging. And with

[13:55] operating budget savings, we've been also looking to see where we can cut

[13:58] corners, um, make new agreements, and save money. Right now, we're estimating

[14:03] that that's about 3.2 million in savings if we reach those goals. I've been more

[14:08] conservative in what I put forward in in my end ofear estimate, but that's what

[14:12] we're shooting for in terms of how we're looking to um save money within the

[14:16] departments. At the same time, we have looked at the other levers. We are

[14:21] looking at revenue enhancements. Uh, of course the council has asked us to look

[14:24] into the sales tax measure. So, we're doing um more research on that and doing

[14:28] some education. Um, we're looking at revenue agreements where we can to bring

[14:32] in more revenue as we did with the downtown parking. We're looking at cost

[14:36] recovery and cost allocation. Uh, parks and recreation updated their cost

[14:40] recovery plan um for their fees last year and so this year their revenues are

[14:46] coming in higher because those new fees were put in place before this fiscal

[14:49] year. We'll be doing a citywide cost allocation through the finance

[14:53] department to make sure that general fund costs are being properly allocated.

[14:57] In addition, we're pursuing grant opportunities. Um, as you know, we have

[15:00] the contract with the grants coordinator and we've been successful with several

[15:04] grants recently. Um, the 20 20 million about uh grant that we received um for

[15:11] the um for the Fashion Island Boulevard project as well as the $1.2 $2 million

[15:18] grant for Lakeshore Community Daycare Center and the 0.55 million grant for

[15:22] the real time information center. Um so those are all uh projects that are

[15:27] moving forward on grants. And then we also have economic development. Uh the

[15:31] city council recently adopted that work plan for the next three years and we're

[15:35] looking at items to expand and diversify revenues through that economic

[15:39] development work plan. Um an example would be the billboard policies that'll

[15:43] be coming to the council in another month or two. Um so these again are the

[15:47] kind of levers that we continue to work on um in order to kind of re reduce um

[15:54] to reduce our expenditures and improve the uh revenues within our financial

[15:58] sustainability plan. And then the next thing I want to talk

[16:03] about before we finish is the sewer fund. Uh this of course is the city's

[16:07] main enterprise fund. Um and I wanted to give you an update on where that is.

[16:13] This is again based on um all the customers within the sewer fund

[16:17] enterprise. So the mid-year projection for their revenues is we're estimating

[16:21] about 96.3 million um in revenues for them. That is a little bit of an

[16:26] increase from what we've budgeted at the beginning of the year. At the same time,

[16:30] we do anticipate seeing some um savings due to salary vacancies. So we're

[16:36] estimating expenditures at about 62.8 million. Um, CIP expenditures were

[16:42] amended and they're looking to be the same right now at 31.4.

[16:47] And then that gets us to an unrestricted fund balance of about $34 million.

[16:54] This is not unexpected. There's a couple of things that have been added to our

[16:58] reserve. Um, for example, in last fiscal year and then also in this fiscal year,

[17:04] we are now seeing the state revolving loan funds come in. And so that is a big

[17:09] infusion of cash that is coming to reimburse us for our clean water program

[17:12] expenditures. So that has boosted our unrestricted fund balance. And at the

[17:17] same time um you know this fund balance is really going to help us maintain

[17:21] ongoing operations of the sewer fund. It's going to help cover future CIP and

[17:26] it's also going to provide the robust debt coverage ratio that we need to

[17:30] maintain given the amount of financing that we will be paying for the clean

[17:35] water program improvements that were conducted. So um this is a a good

[17:39] balance to see in terms of for our sewer enterprise fund.

[17:43] Then finally just to give you an overview of what we'll be doing on the

[17:47] budget process right now. Um we're working on the two-year budget for

[17:52] fiscal year 2628. Uh departments have submitted their operating budget. We're

[17:57] working on the personnel costs and so we'll be prepared for a budget study

[18:01] session on the operating budget um on April 20th. We'll be also bringing a

[18:07] preview of the capital improvement five-year plan at that meeting. Then

[18:11] we'll have our um first hearing on the budget on June 1st. That'll be our 2628

[18:18] proposed budget. And then at June 15th will be the second scheduled public

[18:23] hearing for the 2628 budget adoption. Oh, and then the other thing that um

[18:29] will be coming forward is we are doing some midyear fiscal year 2526 CIP

[18:35] adjustments. So, it's only capital projects, but we'll be bringing that

[18:38] most likely at the March 16th city council meeting. That'll be a consent

[18:42] item. And with that, if there's any additional

[18:46] questions, I'm here um for those questions.

[18:53] » Thank you very much. This time we'll start with public

[18:57] comment. If anyone in the room has public comment, they can give a yellow

[19:02] request to speak slip to the city clerk. [clears throat]

[19:05] City clerk, can you please tally how many speakers you have?

[19:09] » U Mayor Lorraine, we have one request to speak and that is in our virtual

[19:13] environment. Um our one and only speaker will be Thomas Morgan and we'll set the

[19:18] timer at three minutes.

[19:22] Tom, Thomas, please go ahead and unmute your mic.

[19:25] Uh, good evening. Thank you for the opportunity to speak. Um, I I was just

[19:29] doing a search of the internet and not too long ago and I came across a state

[19:33] controllers report that indicated the county the controller had miscalculated

[19:39] the excess raff over a multi-year period. So, I was just wondering if

[19:44] we're done uh if that's completely flushed itself out or if we still have

[19:49] any impacts from that. Thank you.

[19:53] » Okay. Thank you, Mayor Lorraine. That concludes public comment.

[19:59] » Thank you very much. I think I might just check with uh Director Viser to see

[20:06] if um you happen to have any any response to

[20:11] public comment. >> I mean, I think my response is right now

[20:17] we haven't gotten anything from the county saying that our excess raff is

[20:20] going to be different than budgeted. that our most recent communication from

[20:23] the county um was um very in target um in in line with our estimates. So if

[20:30] there's additional communications, I haven't had any in that front.

[20:34] » Thank you. At this time, uh I would like to ask my fellow council members if they

[20:41] have questions or comments. Council member Diaz Nash, please go

[20:45] ahead. >> Thank you through the mayor and thank

[20:48] you Director Viser. That was clear and understandable and well done very

[20:53] quickly. So, thank you very much to you and your team. Uh, just a couple of

[20:57] questions. One for the public. Why is VLF

[21:02] categorized under property tax? [laughter]

[21:09] » Just you're clear and concise as always. Yes.

[21:16] » So, let's see. I'm trying to think. I mean, yes, there's a there's there's

[21:22] quite a backtracking that we could go through to say why VLF is part of

[21:28] property tax, but in general, um, this I'm trying to think what's the best

[21:35] way to describe this. Um, this is an entitlement that the city is

[21:42] supposed to have from a former source of vehicle license fees. uh that were again

[21:49] a consistent source that we got and yes they have been backfilled by um excess

[21:56] raff and property tax that went through the school districts. Um so VLF is kind

[22:03] of a probably a misnomer really in the end result. Um, but again because it's

[22:09] the because of I mean again I probably need a whole slideshow to go through the

[22:14] triple flip of where how we got here. But in general because um it's funded by

[22:20] um the RAF and property tax that comes from the non-basic aid. That is where

[22:24] that funding goes. It goes into the property tax bucket because it's really

[22:28] part of the Sanonteo County's overall uh property tax assessment.

[22:32] » Okay. >> Is [clears throat] that helpful? I just

[22:34] wanted you to share so that anybody listening to this or looking at it later

[22:39] on >> probably would have that question

[22:42] without going through the 500 slides. >> Yeah.

[22:45] » High level conception. I think that makes total sense. So, thank you.

[22:48] » Well, and I do think it's, you know, I've seen that the county has been

[22:51] trying to work on some messaging to show how VLF has come about and it's actually

[22:56] it's a two-page handout. So, even in a short handout, it is hard to get that

[23:00] messaging consolidated down, but we're working on it. Yes. Good. Thank you. Um,

[23:06] and what is the city's thinking in terms of future budgeting of how we handle

[23:14] VLF? >> So, at the moment, um, for this coming

[23:20] fiscal year, I'm going to potentially be putting zero in to see what that looks

[23:25] like >> for the VLF shortfall. So, again, to be

[23:28] clear, and I don't know if you want to pull up the VLF's funding slide. I think

[23:32] I have it on my screen. Um, so to be clear, we do if we get 16.9 million

[23:39] about right now, 7.1 is estimated as the shortfall. So if we were not going to

[23:45] budget to receive the shortfall, that would be $7 million. 7.1 potentially

[23:50] that we would not be putting in as revenues. So just to jump in a little

[23:55] bit just about what the future of VLF is and how we're approaching it here. Uh

[24:00] director Viser is correct that I'm looking at right now uh budgeting zero

[24:05] in for VLF which is going to hurt us significantly when you're looking at on

[24:08] top of this doesn't account for the $5 to7 million structural deficit that

[24:12] we're dealing with in our forecast. So when you look at a 10-year forecast it

[24:15] did not anticipate completely losing VLF. And so um right now we're working

[24:20] with the county. I am part of a city manager group working with the county

[24:23] manager and uh real real team. We were just on a call [clears throat] with

[24:29] assembly member Diane Pap and she'll continue to you know put forth

[24:32] legislation as we've done in previous years. It's just getting harder and

[24:35] harder every year um to make that happen. This past year we only received

[24:40] I believe 67%. That's why you're seeing that $2.2 million uh deficit which

[24:45] equates to 33% of that VLF. We're also actively the council gave direction to

[24:50] enter into a lawsuit against the state of California because we're fighting on

[24:53] behalf of our residents and for our money on that 33%. Uh and with that the

[24:58] department of finance, you know, and how things shake out and I'm not going to

[25:00] get out out ahead of my wills here with my city attorney right next to me, but

[25:03] you know, we'll be working through that. So, that's a long- winded way of saying

[25:07] we're going to be, you know, looking at zero, you know, but hopefully something

[25:11] can come in with our annual legislation or budget um approval process. You know,

[25:16] hopefully some of the member happen and Senator Becker and our Sanonteo

[25:20] contingent up in the state can make something happen again uh this upcoming

[25:24] year, but honestly, it's we're it's not something that we can depend on as as

[25:29] you're seeing and it is a true threat and this is an existential threat for us

[25:32] and the county will say it too if you talk to our county manager overall and

[25:35] we are the largest city in the county. Therefore, we have the largest piece of

[25:38] VF amongst any of the 20 cities. >> Great. Thank you very much for sharing

[25:42] that both of you. Uh, third question. How does our $113 million general fund

[25:49] reserve compare as a rough rough percentage to general fund reserves in

[25:55] other cities? >> You know, I don't know off the top of my

[25:59] head kind of what other cities are looking at in their general fund

[26:01] reserve, but I it's I would say it's very healthy for us. I mean if you think

[26:05] about when we went through the general fund reserve policy update um we talked

[26:11] about the different components that we had within that and if you put like most

[26:16] people for the kind of um kind of the emergency fund they have like 25%

[26:22] of expenditures set aside and we have that and we were able to put them aside

[26:26] the 25 million in capital. So if you look at that 113 million figure, it

[26:31] includes that 25 million NCIP reserve that we put aside, it includes a 25%

[26:38] reserve. It also includes a 25% contingency reserve. So we have a couple

[26:42] of different buckets and a lot of cities have a target of just that one 25%

[26:48] target. So I do think that um we're doing well in that we have several

[26:52] buckets that we can use to to stabilize um different against different things.

[26:57] So just to jump in a little further on our reserve policy as you guys approved

[27:01] and so uh we have a pension stabilization reserve. We have also the

[27:05] budget contingency reserve. So there's all pieces it's not you know we look at

[27:08] the total and we're looking at 113 million but it's actually broken up into

[27:12] bits and pieces of our overall reserve policy itself. Um so it's not just a

[27:18] stack of just you know the the dollars as just overall reserve. um you've been

[27:23] very deliberate in making sure that there's specific amounts set aside for

[27:27] specific uh rainy day issues and we're having to tap into those. We are in

[27:31] rainy days right now and so we're having to tap into that currently. Um you know

[27:35] depending on how financial markets look on the outlook in the future we've been

[27:39] lucky uh right now the last couple years with Kalpers on our pension uh that

[27:43] they've had really good positive returns. The minute we go and below I

[27:47] think it's about the 6 and a half% right I think is 6.8

[27:50] » 6.8% 8% reserve. The city has to fill that difference

[27:55] » uh in that pot of money. And so that's where having that $10 million will help

[27:58] us to be able to bear that burden in in the future as well.

[28:04] » Thank you. And I think that's a great example for the public of how one number

[28:09] does not tell the story and how we're really prepared for contingencies of of

[28:14] many many different natures. And then my final question is

[28:19] the city is putting a lot more emphasis on streamlining processes you using

[28:24] using technology to improve uh reduce costs or improve improve return to

[28:31] residents. Could we see that that eventually could uh turn into savings

[28:39] that we could actually book or is that just something that we're going to try

[28:43] and be as efficient as we possibly can be and see what happens?

[28:49] » I mean, I think there's a couple of different ways we can look at that. I do

[28:52] think the efficiencies can help us save money in the long run, but more likely

[28:59] it will help allow folks to spend their time on higher value activities that

[29:05] will get to more things that potentially we haven't gotten to before. Um, but

[29:09] again, I think it depends on which technologies that we're talking about.

[29:12] But in in terms of overall, I think it's it's hard to blanket statement it,

[29:17] right? So, so keep adding a little bit more

[29:20] color here, but I think our police chief can attest to this just about technology

[29:24] and the usage of it. You know, right now we've had uh a lot of special events or,

[29:29] you know, protests and whatnot. And so having our drone program, our our our

[29:34] real-time information center has been huge. Uh right, Chief. I think just

[29:38] overall being able the amount of bodies or police officers it would take uh in

[29:43] order to you know make sure that it's a safe event. We're able to um use these

[29:48] drones and our real-time information center to help uh reduce the amount of

[29:52] police presence uh because we're limited on the amount of resources. But we're

[29:56] trying to, you know, use technology to be able to help uh blunt those uh

[30:02] resources and and just overall making sure that our officers are safe, our

[30:07] community is safe. Um or even AI report writing. I know that's something that

[30:10] we're working on too. And so that allows our police officers to be out on the

[30:13] street more. Um, you know, they still got to review all these reports, but it

[30:18] still helps uh reduce time so that we have officers out there not having to um

[30:23] utilize as many officers uh downtime at the station, having to write these

[30:27] reports and being out there in police in our community.

[30:28] » Right. And I think that kind of messaging is be really important to

[30:32] continue to share with the public as we move forward. So, thank you very much

[30:36] for the clear, concise answers. >> Thank you. Anyone else have?

[30:43] » I do. >> Deputy Mayor Nicole Fernandez.

[30:45] » Thank you. >> Um, so

[30:49] to the city manager, um, can you talk a little bit Oh,

[30:52] » turn the mic on. Hi. To the city manager, can you talk a little bit, you

[30:55] have taken a leadership role in trying to find a resolution to the VLF issue?

[30:59] Can you talk a little bit about what that process has been like and what

[31:02] we've done to explore a permanent solution? I know that there have been um

[31:09] it's it's a it's a coalition effort. So would you talk a little bit about that?

[31:13] » Yes. So part of a VLF committee of basically the county and city managers

[31:19] and so we meet every month actually and we've been meeting even uh more

[31:23] frequently and I know that the county is uh really working to put together a

[31:28] great team to really advocate on the county's behalf and all US 20 cities as

[31:32] well. um because the county, you know, 70 million is their impact. We're we're

[31:37] 7 million. So, just on top of that, but um what we're having to do is really put

[31:42] San Monteo County on the map in the cities of San Monteo. And so, we're also

[31:47] going to have to articulate what does that mean for us if we don't get that 7

[31:51] million overall. And so with that right now, the call to action from the county

[31:56] is to ask all the cities to kind of start putting together what those plans

[32:00] would be if that money does not come through in the future. And so we're

[32:04] working on that, but there's also advocacy, lobbying efforts from the

[32:07] political side of things to the governor's office. Um, but also just

[32:11] bringing greater awareness to uh this this VLF issue and the the funding

[32:17] shortfalls that all 20 cities in the county are going to experience.

[32:21] » Thank you. And I know that you've been hard at work in taking a leadership role

[32:24] on that resol that solution a potential solution. So I'm grateful for your

[32:28] leadership, Alex. Um this I also just want to make sure that we highlight for

[32:33] this for this that in some ways this is a narrative issue in the fact that San

[32:39] Monteo County I mean this is a a crux of the budget challenges that we have is

[32:43] the fact that V that we're not getting this VLF money. Um we're [clears throat]

[32:48] we're in a unique situation where we are the I think one of three counties who

[32:51] has this problem, but we're really the the the county the most urban county

[32:54] that really is seeing the full effects of this. Is that right?

[32:57] » Yes. The only other two counties are Mono and Alpine, which are very small

[33:01] counties. And so we are the largest county experiencing this. But there are

[33:05] a couple other counties that on the horizon as you know the property uh the

[33:10] assessed value of the properties and more schools go from uh nonb non-basic

[33:16] aid to basic aid. Um you're going to start seeing these impacts. But we're

[33:21] kind of singled out right now because no other county is really experiencing uh

[33:25] this issue. And so that's why we're continually trying to raise awareness of

[33:29] this issue. >> Right. Thank you very much. And the

[33:33] other sort of crux in us getting receiving the reimbursement and again

[33:36] just to highlight for where we are politically as a city and county is that

[33:41] previously we've had budget chairs from San Monteo County for both budget

[33:45] committees that would usually allow this to go into the draft documents for the

[33:49] legislature. Is that right, Alex? >> You had filtering on these side.

[33:53] » We had friendly Yes, we had friendly legislators that would look to this

[33:57] issue. And with the changes in leadership recently, we've lost in some

[34:01] ways we've lost that that friendly immediiacy. Is that my understanding?

[34:05] » Okay. I just want to make sure that we sort of build the narrative. And um a

[34:08] few weeks ago, uh Mayor Lorraine and I were able to uh attend a county briefing

[34:13] on this matter along with a couple of other matters. I know either one of one

[34:16] of us will report out on it um during news and announcements, but this was a a

[34:21] big part of that discussion. And so I don't know how we are going to in San

[34:27] Monteo because this affects us the most. We're the largest city. I don't know

[34:30] what the plan is for us to build the nar to help build the communication around

[34:34] the VLF issue so that our constituents are activated for this but I would like

[34:40] us to take action on that point whether it's a letter a subcommittee something

[34:43] that where we're pulling in our new communications director communicate

[34:47] community engagement director but this is this is a job one in my mind. Thank

[34:52] you. >> That's exactly what we're working on.

[34:56] » Thank you both. Anyone else? Council >> member mayor, just a few follow-up

[35:01] questions. Thank you for your presentation. Um,

[35:07] you were mentioning the real time real real transfer tax is volatile. What are

[35:13] some of the volatilities or what are some of the reasons why for example we

[35:17] saw such a large dip from 6.2 two down to 1.9.

[35:22] » So again, the real property transfer tax is is especially the the 0.5% which is

[35:28] our was on the blue. Actually, let me open it up so I'm not talking at it.

[35:33] So um the blue uh 0.5% real property transfer tax is dependent really on the

[35:40] housing market since it is a transfer of the housing property. So, as the as

[35:45] there's been issues with the housing market, then we see less property

[35:49] transfer tax. Um, what's interesting is last year, you know, they were like, oh,

[35:54] the housing market's not moving because interest rates are high, but we did have

[35:57] significant movement still in the housing market, but then the 6.2 is

[36:01] really the commercial market. So um that um is the new piece that kind of came in

[36:07] with measure CC is there's been excuse me there's been a lot of commercial

[36:11] property transitions especially last year and some in this year and that is

[36:15] what's leading to kind of those big swings because you're having the over

[36:19] $10 million transfers that are triggering the 1% to measure CC but in

[36:25] general because it's based on the the housing market predominantly given our

[36:29] base that's really kind of it shows the eb and flow of the housing market.

[36:33] » So just the basic you're seeing the volatility here on this graph and so we

[36:39] when we budget our budgeting principle is basically we use

[36:44] ongoing revenues for ongoing costs and then one-time monies for one-time costs.

[36:49] And so really when you look at those red bars over there, you know, it can

[36:54] fluctuate to zero all the way up to it could be even higher than that depending

[36:59] on what commercial real estate uh transfers because this is measure CC

[37:02] which is a 1% on any property over $10 million that's is sold here in the city.

[37:08] And so typically we you know we've been fortunate last year um where that 6.2 2

[37:13] million really helps close the gap um with our deficits, but we can't

[37:18] continually budget at those um amounts. We can comfortably, I think, budget at

[37:24] about what Abby $10 million is what we're doing right now or even that is

[37:28] kind of it's probably 8 million, seven or eight million.

[37:29] » We can do about 8.5 million. >> Yeah. That that we actually look at that

[37:34] we feel confident about the real property transfer tax. So, I just want

[37:38] to be clear. >> Thank you. Um my next question if you

[37:42] could go one slide up there which line slide six no seven maybe

[37:48] I was trying to find the fire JPA um >> oh the expenditure side

[37:52] » one back. >> Yes. So I asked you this but just for

[37:56] public record um I was asking what percentage is is real operation versus

[38:02] legacy costs and if it was hoping you could

[38:05] » right and so when you look at the SMC fire and legacy cost line you see that

[38:09] it's 38.8 million and so that represents about

[38:13] 31.7 is the fire operating and about what

[38:18] does that make that about 7.7 is the legacy costs. Um, so when we um take the

[38:25] budget to the fire board, uh, the Sato Consolidated Fire Board for approval,

[38:30] that's typically got the city's contribution in that. And so that's why

[38:35] this number doesn't change because we agreed to that at the beginning of the

[38:37] year. And again, that's and the legacy costs are also um, they don't change. So

[38:43] that's why the total gets you to 38.8. >> And will legacy costs eventually change?

[38:48] Meaning I I do we have to wait for firefighters not to retire but to to

[38:52] pass to to be no longer with us before uh that drops off or

[38:56] » I mean I I guess what I'm asking too is also we we haven't had our own fire

[39:01] department. We've been part of a JPA for like five and a half years now. So

[39:04] » already we're not we're not continuing the legacy, right? So it seems like that

[39:08] will contract at some point or are the costs going up so that they're kind of

[39:12] offsetting? So this is really the fire's kind of unfunded liability section. So

[39:18] it does have to do with costs incurred prior to and you know we have the

[39:23] benefit of we kind of extend that over time so we don't have to pay those

[39:27] unfunded liabilities right away. So this that legacy cost is really going to be

[39:32] ongoing for quite a while because we're catching up with what we didn't put

[39:35] aside for those costs that we had already committed to back in the day. So

[39:40] um and again as Alex mentioned it does have to do with how the markets are

[39:43] doing right. So our unfunded liability with the city's pension as well as the

[39:47] fire legacy costs um changes depending upon if the contributions have increased

[39:52] in value based on the market value there >> and just overall

[39:57] actuarials. There's a whole science to this uh and formula and so it is uh

[40:03] council member Nuome it goes with your life expectancy.

[40:06] » Yeah. Um and so you'll see that probably in 2040 2041 is when we start uh you

[40:14] know going back to the positive overall because there's a wave of life

[40:19] expectancy at that point. >> Sorry I didn't mean to be grim. Uh

[40:23] [laughter] like my last question was I think you

[40:26] mentioned that there were currently eight frozen positions roughly. What

[40:31] does that represent in in um cost per year? And

[40:35] » are those positions spread across the city or are we finding that like one or

[40:40] two departments are carrying the the heavy lift of that?

[40:43] » So that represents about 08 or $800,000 um8 million. Um so that's about what we

[40:51] expect in general fund savings from those positions. Um we have spread them

[40:55] out across a couple of different departments. Um public works, parks and

[40:59] recreation, finance. So we're trying there's a couple others. So we we're

[41:03] trying to spread them out, but it's really based on opportunity, too. It's

[41:07] kind of when the right vacancy that can be held that has general fund funding

[41:12] can can be frozen is kind of how we're approaching it right now.

[41:16] » Thank you. Thank you, Mr. Mayor. Of course, council members cooker.

[41:20] » Um, this question is probably for the city manager. Um, if we don't get the

[41:26] VLF and we aren't able to pass something like a sales tax, what would happen?

[41:34] So what basically happens is that we're looking at so right now our 10-year

[41:39] forecast which typically includes 100% backfill of our VLF we're at about a5

[41:44] to7 million structural deficit but then when you add the VLF you're looking at 7

[41:49] million and that'll continually grow each year even more so. So you're

[41:53] looking at just next year if um we're not able to get a revenue measure we

[41:57] have our regular starting structural deficit. So you're looking between what

[42:02] Abby probably 14 million at least as a floor.

[42:05] » Mhm. >> And then that quickly. So that's where

[42:08] we say at least we have a runway because you know leadership from the council and

[42:12] from the administration of being able to you know have reserves. We're able to

[42:17] float um the next few years but we have to work through that financial

[42:21] sustainability plan. Um, and then just an idea to throw out there. Um, happy to

[42:29] do follow-up. But the same way we have a G JPA for fire, have we have we ever

[42:34] talked to other cities about doing something like that for maintenance or

[42:40] public works across

[42:43] » since I since I've been here or even in Sano County, I have not uh had seen that

[42:49] » okay >> model

[42:50] » just because it seems like every city in the county has their own departments.

[42:56] But maybe there would be opportunities to collaborate or consolidate.

[43:01] Um, all right. Great presentation. Thank you

[43:05] very much.

[43:09] » Yes, thank you very much, Director Viser.

[43:13] And, uh, I appreciate the update. It is uh, a bit sobering. Um, but

[43:21] I'm glad to know that we are uh, you know, putting multiple irons in

[43:27] the fire to see what we can do uh, to project better going forward. We're not

[43:33] just, uh, putting all our eggs in one basket. Uh, I appreciate learning about

[43:39] um, some savings that we found and uh, some other opportunities to uh, consider

[43:45] revenue opportunities, including the billboard item you mentioned, which will

[43:48] be coming up soon. And uh I recommend everybody uh join us for the upcoming

[43:54] sessions beginning in April for the the next budget to stay updated with where

[44:00] we are. And with that, I believe I will close the item

[44:07] and adjourn the special meeting uh until around 7 o'clock at which time

[44:15] we'll have our general special regular meeting not special. Thank you. All

[44:18] right.

City Council Special Meeting 2/23/2026

Transcript